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Blue Cross Blue Shield of Michigan on Monday reported it earned $265 million in net income in 2013 — its last year as the state's insurer of last resort — on consolidated revenue of $21.3 billion.

Revenue increased 1.9 percent in 2013 from $20.9 billion in 2012, but net income declined 20 percent from $333 million, said Paul Mozak, Blue Cross vice president of finance. Blue Cross earned $40 million in net income in 2011 and $205 million in 2010.

The loss was due to a combination of a drop in investment income and an increase in underwriting losses.

According to generally accepted accounting practices, investment income dropped 14.5 percent to $417 million last year from $488 million in 2012, Blue Cross said.

Underwriting losses totaled $117 million in 2013, a 27 percent increase from $92 million in 2012.

"It can't be overstated — this is an incredibly challenging time in health care," said Daniel Loepp, CEO of Blue Cross, in a statement.

Even so, in 2013 Loepp increased his total compensation by 73 percent to $6.67 million from $3.86 in 2012, said Andy Hetzel, Blue Cross vice president of corporate communications.

While Loepp's base pay was only slightly higher, he received a $2.5 million long-term incentive payment in 2013. His performance goal, which includes the company's financial performance, growth and quality measurements, was set in 2009 and covered the years 2010-2012.

Loepp said Blue Cross is keeping its profit margins near 1 percent and adding to reserves "just enough to ensure continued stability."

As a nonprofit company, Blue Cross adds net income gains to its subscriber reserves that helps boost its RBC. In 2013, surplus funds increased 7.5 percent to $3.29 billion from $3.06 billion the year before.

Blue Cross paid $37 million in federal income taxes in 2013, compared with $66 million in 2012.

Blue Cross also recorded its third straight year of membership growth. While only gaining 3,283 members in Michigan, in 2013, Blue Cross membership now totals 4.45 million for Blue Cross and Blue Care Network.

Blue Care, the state's largest HMO with 685,000 members, posted net income of $120.2 million last year.

In a financial statement also filed today with the Michigan Department of Insurance and Financial Services, Detroit-based Blue Cross said it lost $268 million in health insurance underwriting, primarily driven by losses in the individual market.

After net investment earnings of $169 million, Blue Cross posted a net loss of $86 million on revenue of $6.6 billion, according to statutory accounting principles required by the state insurance department. The SAP numbers do not include the Blues' self-insured business, which represents 60 percent of its total revenue and includes such subsidiary companies as Blue Care and Accident Fund Insurance Company of America.

As the state's former insurer of last resort, Blue Cross was required to accept any policyholder, regardless of pre-existing medical conditions.

Under the Patient Protection and Affordable Care Act, however, all health insurers now are required to write policies for people regardless of their medical histories.